Everyone involved in export compliance understands that the cornerstone of corporate compliance is a strong export compliance program. A sign that your export compliance program is functioning properly is the ability of your employees to identify and prevent potential export compliance violations before they occur. One essential tool for an effective export compliance program is employee training on the recognition and remediation of “red flags” in export transactions. The goal of this article is to explain what is meant by “red flags” and the forms in which the “red flags” present themselves in prospective export transactions.
Scenario – Missiles, Inc., of the U.S. (Your Company) received a purchase order from ABC GmbH of Germany for sophisticated missile engine components. Per your company’s Export Compliance Manual, Missiles, Inc., performed its due diligence on the new customer ABC GmbH. The due diligence determined the following facts about ABC GmbH:
- ABC GmbH has no company website;
- ABC GmbH’s purchase order was sent to you via a Gmail email account;
- ABC GmbH’s asked if Missiles, Inc., would accept a cash payment for the missile engine components;
- ABC GmbH’s purchase order did not request any ongoing support, which is customary for these products;
- ABC GmbH is listed on several investment websites as a book store;
- A Google Earth search identified ABC GmbH at the street address provided and the store front appears to be a book store;
- Missiles, Inc., ran a denied party screening of ABC GmbH against U.S. Government denied party lists and revealed a hit for ABC GmbH of Germany, but the address is slightly different than the address for ABC GmbH;
- ABC GmbH asked for the missile engine components to be sent to their freight forwarder in the U.S., and did not note delivery to their address in Germany; but identified for the freight forwarder to contact ABC GmbH for delivery instructions
- Lastly, ABC GmbH refused to provide an end use statement regarding its intended use of the missile engine components.
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